Tesla’s literal master plan for making electric vehicles common hinges on the old principle of economies of scale. “The strategy of Tesla is to enter at the high end of the market, where customers are prepared to pay a premium,” Elon Musk wrote over a decade ago, “and then drive down market as fast as possible to higher unit volume and lower prices with each successive model.”
Musk was making a bet that as electric car technology became more mature, and the company produced cheaper and higher-volume cars, the economies of scale would make production more efficient and cheaper, to the point where making an electric car would be as cheap as making a gasoline-powered car.
But unfortunately for Musk, production of the mass-market Model 3 hasn’t been as easy as he seemed to hope. Manufacturing of the Model 3 has been underway for nine months now, and despite spending millions on a state-of-the-art production line, Tesla is still using far more human workers per vehicle than most major competitors.
Analysis from Bloomberg suggests that as recently as the last week of March, Tesla was using about 35 employees for every vehicle coming off the line. The report compared that productivity to plants owned in the US and Canada by Nissan and Honda, and the results weren’t good. Those plants used 5 workers per car and 3.5 workers per car respectively.
Things are liable to slowly get better for Tesla, of course. The company is brand-new to high-volume manufacturing, and in its rush to get the Model 3 to market, Tesla skipped the traditional pre-production process that fine-tunes tooling and optimizes the workflow, in favor of working things out as they go.
The real takeaway from the report is that unlike some of Musk’s other notable successes, the car industry may not have been as ripe for disruption as Tesla would have hoped. SpaceX has already succeeded in dramatically lowering the cost of launching payloads into orbit, largely because it came into a highly non-competitive industry and was able to use a different approach to find efficiencies. The mass production of automobiles, on the other hand, has been perfected through decades of intense competition, and Tesla’s slowly finding out that maybe the surviving companies are good at manufacturing after all.
